You could be a meteorologist all your life and never see something like this... it would be a disaster of epic proportions... it would be The Perfect Storm.

-- The Perfect Storm, 2000



This is what many managers feel about the current recession "" it could be the Perfect Storm. Rather than being due to a single cause, the recession is the result of many causes. And because of today's interdependencies and speed of communication, the impacts are being felt more quickly. We are in the midst of great change, and the business environment in the future will not be the same as it was in 2008 "" we cannot weather this recession and simply wait for things to return to normal. The unpredictable seems to be happening. Just cutting costs and delaying investments may not be enough to get through the recession this time.

To manage the short-term risks and to look for future opportunities, your organization needs a plan.

Following are nine key areas of consideration to help in this effort:


1. Revaluate and focus on business objectives.

During prosperous times the definition of business objectives may be too general and difficult to measure . For example a business objective could be: "to maintain profitable growth." While this is admirable, it is very difficult to measure. A better, more measurable definition would be: "to achieve profitable growth by focusing on meeting the needs of our customers, reducing delivery times and reducing the cost of production." In this case, the business can focus resources on a customer ""centric strategy.

You should take this opportunity to review your business objectives to ensure they remain relevant and are measurable.

2. Be sure to align resources with business objectives.

Once you have reviewed your business objectives, you should work to ensure that plans and resources are aligned with these objectives. An organization may have previously devoted resources to projects not directly relevant to business objectives. For example, an IT department may have been in the process of researching technologies that are not customer facing, referring back to the previous business objective example.

3. Make sure you have the right indicators to monitor the impact of the recession.

There are leading indicators that offer an early warning that risks associated with a recession might already be impacting business performance. These indicators include:

• earnings forecasts




• cash flow forecasts




• employee turnover




• inventory levels (including the inventory that is sourced from key suppliers)




• debt levels (especially key customers)




• customer satisfaction surveys




• key supply chain measurements.

Review key indicators to ensure they include performance indicators that measure the impact of the recession. This review should include the completeness of the indicators, measurement reporting (such as trend analysis), focus on key suppliers, and the timeliness of reporting.

4. Take a hard look at the management team to be sure you have the right people in place to weather the recession.

Many managers do not have experience dealing with the repercussions of a recession. Some red flags to watch for:

• anyone viewed as not "˜part of the team'




• a lack of proper technical or other skills (although some of these can be taught/learned)




• someone with the right skills, but in the wrong part of the business ( a good communicator might be well-suited for a customer-facing role, a good project manager might be more valuable assigned to a critical project, or a manager with a track record of achieving budgeted results might be primed to oversee a larger part of the organization).

5. Evaluate if you have the right skills in the organization to achieve your objectives and identify the people with "˜critical' skills.

In the past, an objective might have been just to reduce head count. However, key employees may have skills that would be difficult to replace in the future or are critical to current needs. Be smart about head-count reductions to be sure your short- and long-term objectives are both in view.

6. Consider establishing a recession management team.

This team would create and implement the recession management plan. They would also be responsible for the communication plan to ensure that management and employees are aware that their concerns are being addressed. The team could provide the basis for the establishment of a Risk Management Council to oversee risk management.

7. Conduct a stakeholder analysis.

"˜Boards are reconsidering whether they are sufficiently comfortable not only with the company's code of conduct, but also with the effectiveness of related support systems and how the company deals with customers, suppliers, business partners, and others while carrying out its business activities. And of course, with the current credit crunch and badly damaged economy, directors are appropriately focusing like a laser on actions to be taken to maintain revenue and profitability goals"¦.'

"˜A board's responsibility is to serve the interests of the company and its shareholders, centered on enhancing long-term share value. My experience is that successful managers find common ground by developing "win-win" environments, where working effectively with suppliers, customers, staff and others provides the best results'

Rick Steinberg, Compliance Week, January 20, 2009 (subscription required)

Take caution in only considering the Board and the Audit Committee your primary stakeholders. Other stakeholders may be impacted or may even react publicly to the organization's response to the recession. You'll want to identify these stakeholders, document their needs, assess and analyze their interest and influence, and manage their expectations.

Other stakeholders could include:

"¢ Government
"¢ Regulators
"¢ External auditors and Examiners
"¢ Labor
"¢ Customers
"¢ Suppliers
"¢ Competitors
"¢ Special interest groups
"¢ Market expectations (including analysts and rating agencies)

8. Assess new opportunities.

In addition to considering the risks associated with a recession, management could also consider potential opportunities. Effective risk management could assist in identifying opportunities, especially when considering an organization's responses to potential risks. Examples of opportunities are:

• If a risk assessment identified that some of the benefits of globalization may not be as attractive in the future, then there could be opportunities to obtain better terms and arrangements with domestic suppliers.




• Potential M&A opportunities.




• Divestiture of business units that may become less profitable in the future or could provide capital for other activities, such as acquisitions or to pay down debt.

9. Consider other potential threats and opportunities.

There are other threats and opportunities that you may not be aware of because:

• You have insufficient research; for example a competitor withdrawing from the market or a competitor taking over your major supplier.




• There has been no communication or ineffectual communication within the organization; for example, the customer technical support center is receiving an increasing number of calls that a particular part is failing, but no one communicates this issue properly to manufacturing or quality control.




• A risk has such a low likelihood of occurring, however its impact would be considerable; for example, a sudden, major move of investment from the US Dollar to the Euro may have a considerable impact on exchange rates which could directly impact an organization's costs and prices.

Consider the following steps:

• The recession management team should actively consider potential risk and opportunity scenarios and response/actions should these events occur. You should review the scenarios periodically to assess whether they are more likely to occur and to confirm that the proposed response remains appropriate and up to date.




• Make sure the right people are getting the right information in a timely manner. Review your monitoring and communication plans to ensure they are adequate. For example, if potential regulations could impact many people within the organization, the communication team could establish an internal blog to collect information, links and opinions on regulatory trends. Similarly, if customer satisfaction is an important business objective, this should be measured by the customer service desk, and the results and trends communicated to the right people (marketing, sales, quality control, etc.).




• Periodically review, update and test business continuity and crisis plans. The plans should address all critical areas of the organization, including a communication and crisis management plan to put into place should an unforeseen and unplanned event occur. For example, if a container ship bringing a supply of critical parts were to sink, key questions would include: who would need to be told, who could approve critical alternate sourcing decisions and how or should this be communicated to stakeholders.